The early-2014 recovery in crop values has put the brakes on
the fall in US farmland prices, which could return to growth next month,
although spending on farm machinery remains weak.

Farmland prices in major US agricultural states, from North
Dakota to Colorado, have fallen in June for a seventh successive month, a
survey by Creighton University showed, highlighting in particular reduced
interest from non-farm buyers.

However, the index rating of 49.1 was above the 46.7 for May
and came closer to the 50.0 which indicates a neutral market.

The improvement reflected the run-up in prices of major
crops such as corn and wheat since late January to highs early last month, with
farmland market moves typically lagging to some extent movements in
agricultural commodities.

'Floor under farmland
prices'

"Stronger farm commodity and grain prices over the last
several months appear to have put a floor under farmland prices," said Creighton
University economics professor Ernie Goss, who oversees the survey.

"I expect the index to move above growth neutral next month."

That said, crop values have since early May reversed most of
their gains made in their spring rally, although fears of excessive wetness in
the US have emerged this week to halt the decline.

And the farm machinery market has yet to show signs of improved
sentiment, with an index for the sector coming in at 35.0, up 1.4 points month
on month but remaining well below the 50.0 neutral level.

"Despite improving economic activity on the regional farm,
agriculture equipment and implement dealers in the region are experiencing very
weak sales to farmers in the region," Professor Goss said.

Arable vs livestock

In fact, data from the Association of Equipment Manufacturers
last week showed a decline in US sales of four-wheel-drive tractors, used by
arable farmers, accelerating last month to 16.1%, on a year-on-year basis, from
7.5% in April.

Sales of combines dropped 16.1% last month, compared with a
3.2% drop in April.

However, sales of smaller tractors, favoured by livestock
farmers, in the 40-100 horsepower range rose by 6.9% last month, in line with
the April increase, chiming with the revived fortunes in livestock farms encouraged
by weaker grain and, therefore, feed prices besides animal shortages.

Nearly half of bankers surveyed by Creighton University said
that higher beef and pork prices have "increased overall economic activity" in
their area, with most of the other lenders in areas with small amounts of livestock
production.

Last year's winners

The data came as the US Department of Agriculture highlighted
the extent of the rally in farmland prices last year, before lower crop prices
instilled the reversal highlighted by the Creighton University report.

While prices overall rose 8.3% over 2013 to an average of
$2,730 per acre, gains were far stronger in major cropping states such as
Illinois, at 14.3% to $7,100 per acre, and Iowa, at 17.9% to $7,700 per acre.

In North Dakota, prices soared by 34%, although values, at
$1,550 per acre, remain well below the national average.

Values were strongest in states near metropolitan centres,
such as New Jersey, where they grew 4.1% to $12,800 per acre, reflecting stronger
appeal from lifestyle buyers, and perhaps some development potential.

In Texas, a major cattle-rearing state, which has also
suffered extended drought, values fell by 0.6% to $1,680 per acre.